FTC v. Penn State Hershey Med. Ctr. — May 2016 (Summary)

ANTITRUST

FTC v. Penn State Hershey Med. Ctr.
No.:  1:15-cv-2362 (M.D. Pa. May 9, 2016)

The United States District Court for the Middle District of Pennsylvania denied a motion for a preliminary injunction filed by the Federal Trade Commission (“FTC”) seeking to enjoin Penn State Hershey Medical Center (“Hershey”) from taking any steps to consummate its proposed merger with Pinnacle Health System (“Pinnacle”).

The court first held that the FTC had failed to set forth a relevant geographic market and, thus, failed to establish a prima facie case under the Clayton Act.  According to the court, the FTC’s four county “Harrisburg Area” relevant geographic market “is unrealistically narrow and does not assume the commercial realities faced by consumers in the region.”  In coming to this conclusion, the court relied upon, among other things, evidence indicating that over half of Hershey’s revenue is generated from patients outside the FTC’s proposed geographic market.  The court also “weighed the equities” in the case and concluded that “[a]fter a thorough consideration of the equities in play, we find the majority of these factors [involved in the merger] weigh in the public interest.”  In support of this conclusion, the court noted that the merger would alleviate some of Hershey’s capacity constraints and assist the hospitals in responding to the movement toward risk-based contracting with payors.  The court ended its opinion by observing as follows:  “Our determination reflects the healthcare world as it is, and not as the FTC wishes it to be.  We find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the Hospitals intend here.  Like the corner store, the community medical center is a charming but increasingly antiquated concept.  It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither.”  One day after this opinion was issued, on May 10, 2016, the FTC filed a motion for injunction pending appeal of the district court’s decision.